Market Commentary

Updated on December 4, 2024 10:12:29 AM EST

We had three relevant economic reports released this morning, starting with November’s ADP Employment report at 8:15 AM ET that showed only 146,000 new private-sector payrolls were added to the economy. This fell short of the 163,000 that was expected. Furthermore, a downward revision of 49,000 to October’s number means there were far fewer private jobs added over the past two months than previously thought. This is a sign the employment sector isn’t doing as well as expected. We can label the report good news for rates, however, this report isn’t considered to be reliable in predicting what Friday’s governmental Employment report will show. This is why we haven’t seen a positive move in bonds.

The other two morning releases came at 10:00 AM ET. The Institute for Supply Management (ISM) gave us more favorable news by announcing their non-manufacturing (service) index dropped to 52.1 last month. Predictions had it at 55.5 for November. The decline means fewer surveyed service industry executives felt business improved during the month than did in October. Slower business activity translates into weaker economic growth that makes bonds more appealing to investors.

Octobers Factory Orders report revealed a 0.2% increase in new orders for durable and non-durable goods. This was close to forecasts and points to slight growth in manufacturing. However, since this is just a moderately important piece of data and showed no big surprises, we can consider it neutral for mortgage rates.

This afternoon brings us a speaking engagement with Fed Chairman Powell and the release of the Fed Beige Book. Chairman Powell is scheduled to participate in a moderated discussion at a New York summit hosted by the NY Times. It is hard to predict if this event will yield any worthwhile headlines, but the markets always listen when he speaks. He is expected to start at 1:40 PM ET, meaning it is a mid-afternoon event for rates.

The Fed Beige Book report summarizes economic activity in each of the Fed’s 12 regional districts, compiled from their business contacts. It often is a non-factor for mortgage rates, but since the Fed uses this info during their FOMC meetings it has the potential to cause a reaction in the bond and mortgage markets. Topics such as inflation, employment and consumer spending will draw the most attention. If there is a reaction to the report, it will come shortly after the 2:00 PM ET release.

Tomorrow’s only relevant release is the 8:30 AM ET weekly unemployment update. Analysts are expecting it to show 215,000 new claims for jobless benefits were filed last week. This would be an increase from the previous week’s 213,000 initial filings, signaling the employment sector weakened slightly. A larger number of claims would be favorable for bonds and mortgage rates.